Prepared Floor Remarks by U.S. Senator Chuck Grassley of Iowa
Biden’s Reckless Spending Will Hurt our Farmers
Wednesday, July 21, 2021
 
To finance their big spending agenda, President Biden and his allies in Congress, have called for over $3 trillion in new taxes. They claim these tax hikes are targeted solely at the wealthy. However, imbedded in their tax hike proposals is a direct attack on family farms and rural communities.
 
If Democrats get their way, family farms would be decimated through the enactment of a second “death tax” that operates on top of the existing estate tax. This second death tax would subject the paper gains of business and investment assets to tax upon transfer to the next generation. At the same time, the current long-term capital gains rate would be nearly doubled.
 
As a result, decades of paper gains in farmland and other property could be subject to capital gains taxes at rates as high as 43.4 percent. Given inflation and the escalating value of farmland over the past several decades, an average sized Iowa farm could easily generate half a million dollar tax bill or more based on land values alone.
 
Moreover, according to an analysis by KPMG, family farms captured both by this new “death tax” and the existing estate tax could see tax rates exceeding 66 percent. That’s not taxation, its confiscation.
 
Proponents claim this new tax is needed to close a loophole that allows the appreciation in the value of property over one’s lifetime to go untaxed. But, death isn’t a loophole and it shouldn’t be a taxable event.
 
In fact, rather than solving a problem, this proposal would resurrect failed policy from decades past. As part of the Tax Reform Act of 1976, Congress experimented with a similar attempt to subject paper gains in inherited assets to tax. This change was immediately met with outcries from farmers, ranchers and small business owners resulting in its repeal a few years later.   
 
As problematic as this change was for farmers in 1976, what Democrats have in store would actually be worse. Where in 1976 no tax was due until an asset was eventually sold by an heir, current proposals could result in a tax bill due in the year of death.
 
As it’s often said, farmers are land rich and cash poor. This means it’s unlikely for the decedent’s estate to have cash on hand to satisfy a six figure tax bill. As a result, all or portions of a family farm might have to be sold off to satisfy an oversized tax bill.
 
This would endanger the continuation of the family farm from one generation to the next. And it would devastate rural communities along with it. As one recent study found, subjecting paper gains to tax at death could cost as much as 80,000 jobs each year over the next decade.
 

To my Democrat colleagues, pursue this policy at your own peril. I assure you farmers, ranchers, and small business owners are paying close attention.